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BP's $24B Sale Doesn't Mean a Russian Retreat

Already in October, BP's M&A work has been on full display. The company recently sold its Texas City refinery
Marathon Petroleum(MPC) for $2.5 billion, in a deal expressly designed to raise capital for spill claims. Meanwhile, BP's negotiations with
Rosneft on its TNK-BP stake have been a front-page deal intrigue for much of the fall.

Throughout 2012, BP's been doing heavy lifting selling refineries, pipelines and oil fields it sees as not crucial to the company's future, in an effort to sell down a forecast $38 billion in assets by 2013. Were the $12.3 billion in TNK-BP cash to be considered part of that asset sale figure, BP would already be complete on its M&A goals.

In September, BP
announced a deal to sell $5.5 billion in Gulf of Mexico oil drilling assets to
Plains Exploration and Production(PXP). The assets being shopped already produce roughly 59,500 barrels a day and hold a reported 120 million barrels of oil in production reserves.

BP had sold over $24 billion in midstream assets, and $10 billion in oil exploration and production assets, according to data compiled by
Bloomberg through the end of 2011.

Still, the oil giant has run into problems as it looks to sell non-core assets, notably in years of speculation on how it would exit Russia after company executives were kicked off of TNK-BP's board - and on its stake in an Argentinean oil venture that's suffered from changing political winds.

In November 2011, BP saw a $7.1 billion deal to sell a majority 60% stake in an Argentinean oil venture called
Pan American Energy fall through when its partners,
Bridas of Argentina and
CNOOC(CEO) of China, objected to negotiations. The move was a hit to BP, which in October announced it would raise $45 billion through divestitures by 2013.

After CNOOC and Bridas walked away from BP's Pan American sale, the company indicated in a statement that it would be "happy to return to long-term ownership" of the assets after its finances improved. In November, BP said that its sale program is focused on eliminating "non-strategic assets and not driven by a requirement to raise cash."

BP returned quickly to the deals table,
selling its natural gas liquids business in Canada to
Plains All American Pipeline(PAA) for $1.67 billion at the end of 2011.

In mid August, BP said it would sell its California oil refinery and 800 statewide gas stations to refining giant
Tesoro(TSO) for $2.5 billion.

Even with spill-related asset sales hitting a peak in 2012, BP still faces substantial risk when it comes to the lingering legal issues from Macondo.

BP investors and analysts were rattled in late August last week when documents filed by the
Department of Justice included language saying the DOJ was going to pursue a gross negligence case against BP.

Reports earlier this year -- as well as the findings of a government investigation into the Macondo spill -- suggested that a gross negligence case would be difficult for the government to prove, and that the government and BP were moving closer to a settlement. Nevertheless, the environmental fine associated with gross negligence if proven could be four times as much as the fine otherwise, and could reach $21 billion.

"[Our] 'base case' expectation regarding Macondo litigation remains that BP will agree a settlement with the DoJ, which we estimate in the order of ~$20bn," wrote Morgan Stabley analysts led by Martijn Rats, in a Monday note to clients assessing BP's TNK disposal.